119THCONGRESS
1
STSESSION H. R. 33
AN ACT
To amend the Internal Revenue Code of 1986 to provide
special rules for the taxation of certain residents of Tai-
wan with income from sources within the United States.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2 2
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TITLE I—UNITED STATES-TAI-1
WAN EXPEDITED DOUBLE- 2
TAX RELIEF ACT 3
SEC. 101. SHORT TITLE. 4
This title may be cited as the ‘‘United States-Taiwan 5
Expedited Double-Tax Relief Act’’. 6
SEC. 102. SPECIAL RULES FOR TAXATION OF CERTAIN 7
RESIDENTS OF TAIWAN. 8
(a) I
NGENERAL.—Subpart D of part II of sub-9
chapter N of chapter 1 of the Internal Revenue Code of 10
1986 is amended by inserting after section 894 the fol-11
lowing new section: 12
‘‘SEC. 894A. SPECIAL RULES FOR QUALIFIED RESIDENTS OF 13
TAIWAN. 14
‘‘(a) C
ERTAININCOMEFROMUNITEDSTATES 15
S
OURCES.— 16
‘‘(1) I
NTEREST, DIVIDENDS, AND ROYALTIES, 17
ETC.— 18
‘‘(A) I
N GENERAL.—In the case of interest 19
(other than original issue discount), dividends, 20
royalties, amounts described in section 21
871(a)(1)(C), and gains described in section 22
871(a)(1)(D) received by or paid to a qualified 23
resident of Taiwan— 24 3
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‘‘(i) sections 871(a), 881(a), 1441(a), 1
1441(c)(5), and 1442(a) shall each be ap-2
plied by substituting ‘the applicable per-3
centage (as defined in section 4
894A(a)(1)(C))’ for ‘30 percent’ each place 5
it appears, and 6
‘‘(ii) sections 871(a), 881(a), and 7
1441(c)(1) shall each be applied by sub-8
stituting ‘a United States permanent es-9
tablishment of a qualified resident of Tai-10
wan’ for ‘a trade or business within the 11
United States’ each place it appears. 12
‘‘(B) E
XCEPTIONS.— 13
‘‘(i) I
N GENERAL.—Subparagraph (A) 14
shall not apply to— 15
‘‘(I) any dividend received from 16
or paid by a real estate investment 17
trust which is not a qualified REIT 18
dividend, 19
‘‘(II) any amount subject to sec-20
tion 897, 21
‘‘(III) any amount received from 22
or paid by an expatriated entity (as 23
defined in section 7874(a)(2)) to a 24 4
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foreign related person (as defined in 1
section 7874(d)(3)), and 2
‘‘(IV) any amount which is in-3
cluded in income under section 860C 4
to the extent that such amount does 5
not exceed an excess inclusion with re-6
spect to a REMIC. 7
‘‘(ii) Q
UALIFIED REIT DIVIDEND .— 8
For purposes of clause (i)(I), the term 9
‘qualified REIT dividend’ means any divi-10
dend received from or paid by a real estate 11
investment trust if such dividend is paid 12
with respect to a class of shares that is 13
publicly traded and the recipient of the 14
dividend is a person who holds an interest 15
in any class of shares of the real estate in-16
vestment trust of not more than 5 percent. 17
‘‘(C) A
PPLICABLE PERCENTAGE .—For 18
purposes of applying subparagraph (A)(i)— 19
‘‘(i) I
N GENERAL.—Except as pro-20
vided in clause (ii), the term ‘applicable 21
percentage’ means 10 percent. 22
‘‘(ii) S
PECIAL RULES FOR DIVI -23
DENDS.— In the case of any dividend in 24
respect of stock received by or paid to a 25 5
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qualified resident of Taiwan, the applicable 1
percentage shall be 15 percent (10 percent 2
in the case of a dividend which meets the 3
requirements of subparagraph (D) and is 4
received by or paid to an entity taxed as 5
a corporation in Taiwan). 6
‘‘(D) R
EQUIREMENTS FOR LOWER DIVI -7
DEND RATE.— 8
‘‘(i) I
N GENERAL.—The requirements 9
of this subparagraph are met with respect 10
to any dividend in respect of stock in a 11
corporation if, at all times during the 12- 12
month period ending on the date such 13
stock becomes ex-dividend with respect to 14
such dividend— 15
‘‘(I) the dividend is derived by a 16
qualified resident of Taiwan, and 17
‘‘(II) such qualified resident of 18
Taiwan has held directly at least 10 19
percent (by vote and value) of the 20
total outstanding shares of stock in 21
such corporation. 22
For purposes of subclause (II), a person 23
shall be treated as directly holding a share 24
of stock during any period described in the 25 6
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preceding sentence if the share was held by 1
a corporation from which such person later 2
acquired that share and such corporation 3
was, at the time the share was acquired, 4
both a connected person to such person 5
and a qualified resident of Taiwan. 6
‘‘(ii) E
XCEPTION FOR RICS AND 7
REITS.—Notwithstanding clause (i), the re-8
quirements of this subparagraph shall not 9
be treated as met with respect to any divi-10
dend paid by a regulated investment com-11
pany or a real estate investment trust. 12
‘‘(2) Q
UALIFIED WAGES.— 13
‘‘(A) I
N GENERAL.—No tax shall be im-14
posed under this chapter (and no amount shall 15
be withheld under section 1441(a) or chapter 16
24) with respect to qualified wages paid to a 17
qualified resident of Taiwan who— 18
‘‘(i) is not a resident of the United 19
States (determined without regard to sub-20
section (c)(3)(E)), or 21
‘‘(ii) is employed as a member of the 22
regular component of a ship or aircraft op-23
erated in international traffic. 24
‘‘(B) Q
UALIFIED WAGES.— 25 7
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‘‘(i) IN GENERAL.—The term ‘quali-1
fied wages’ means wages, salaries, or simi-2
lar remunerations with respect to employ-3
ment involving the performance of personal 4
services within the United States which— 5
‘‘(I) are paid by (or on behalf of) 6
any employer other than a United 7
States person, and 8
‘‘(II) are not borne by a United 9
States permanent establishment of 10
any person other than a United States 11
person. 12
‘‘(ii) E
XCEPTIONS.—Such term shall 13
not include directors’ fees, income derived 14
as an entertainer or athlete, income de-15
rived as a student or trainee, pensions, 16
amounts paid with respect to employment 17
with the United States, any State (or polit-18
ical subdivision thereof), or any possession 19
of the United States (or any political sub-20
division thereof), or other amounts speci-21
fied in regulations or guidance under sub-22
section (f)(1)(F). 23
‘‘(3) I
NCOME DERIVED FROM ENTERTAINMENT 24
OR ATHLETIC ACTIVITIES.— 25 8
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‘‘(A) IN GENERAL.—No tax shall be im-1
posed under this chapter (and no amount shall 2
be withheld under section 1441(a) or chapter 3
24) with respect to income derived by an enter-4
tainer or athlete who is a qualified resident of 5
Taiwan from personal activities as such per-6
formed in the United States if the aggregate 7
amount of gross receipts from such activities 8
for the taxable year do not exceed $30,000. 9
‘‘(B) E
XCEPTION.—Subparagraph (A) 10
shall not apply with respect to— 11
‘‘(i) income which is qualified wages 12
(as defined in paragraph (2)(B), deter-13
mined without regard to clause (ii) there-14
of), or 15
‘‘(ii) income which is effectively con-16
nected with a United States permanent es-17
tablishment. 18
‘‘(b) I
NCOMECONNECTEDWITH AUNITEDSTATES 19
P
ERMANENT ESTABLISHMENT OF A QUALIFIEDRESI-20
DENT OFTAIWAN.— 21
‘‘(1) I
N GENERAL.— 22
‘‘(A) I
N GENERAL.—In lieu of applying 23
sections 871(b) and 882, a qualified resident of 24
Taiwan that carries on a trade or business 25 9
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within the United States through a United 1
States permanent establishment shall be taxable 2
as provided in section 1, 11, 55, or 59A, on its 3
taxable income which is effectively connected 4
with such permanent establishment. 5
‘‘(B) D
ETERMINATION OF TAXABLE IN -6
COME.—In determining taxable income for pur-7
poses of paragraph (1), gross income includes 8
only gross income which is effectively connected 9
with the permanent establishment. 10
‘‘(2) T
REATMENT OF DISPOSITIONS OF UNITED 11
STATES REAL PROPERTY .—In the case of a qualified 12
resident of Taiwan, section 897(a) shall be applied— 13
‘‘(A) by substituting ‘carried on a trade or 14
business within the United States through a 15
United States permanent establishment’ for 16
‘were engaged in a trade or business within the 17
United States’, and 18
‘‘(B) by substituting ‘such United States 19
permanent establishment’ for ‘such trade or 20
business’. 21
‘‘(3) T
REATMENT OF BRANCH PROFITS 22
TAXES.—In the case of any corporation which is a 23
qualified resident of Taiwan, section 884 shall be ap-24
plied— 25 10
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‘‘(A) by substituting ‘10 percent’ for ‘30 1
percent’ in subsection (a) thereof, and 2
‘‘(B) by substituting ‘a United States per-3
manent establishment of a qualified resident of 4
Taiwan’ for ‘the conduct of a trade or business 5
within the United States’ in subsection (d)(1) 6
thereof. 7
‘‘(4) S
PECIAL RULE WITH RESPECT TO INCOME 8
DERIVED FROM CERTAIN ENTERTAINMENT OR ATH -9
LETIC ACTIVITIES.— 10
‘‘(A) I
N GENERAL.—Paragraph (1) shall 11
not apply to the extent that the income is de-12
rived— 13
‘‘(i) in respect of entertainment or 14
athletic activities performed in the United 15
States, and 16
‘‘(ii) by a qualified resident of Taiwan 17
who is not the entertainer or athlete per-18
forming such activities. 19
‘‘(B) E
XCEPTION.—Subparagraph (A) 20
shall not apply if the person described in sub-21
paragraph (A)(ii) is contractually authorized to 22
designate the individual who is to perform such 23
activities. 24 11
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‘‘(5) SPECIAL RULE WITH RESPECT TO CER -1
TAIN AMOUNTS.—Paragraph (1) shall not apply to 2
any income which is wages, salaries, or similar re-3
muneration with respect to employment or with re-4
spect to any amount which is described in subsection 5
(a)(2)(B)(ii). 6
‘‘(c) Q
UALIFIEDRESIDENT OFTAIWAN.—For pur-7
poses of this section— 8
‘‘(1) I
N GENERAL.—The term ‘qualified resi-9
dent of Taiwan’ means any person who— 10
‘‘(A) is liable to tax under the laws of Tai-11
wan by reason of such person’s domicile, resi-12
dence, place of management, place of incorpora-13
tion, or any similar criterion, 14
‘‘(B) is not a United States person (deter-15
mined without regard to paragraph (3)(E)), 16
and 17
‘‘(C) in the case of an entity taxed as a 18
corporation in Taiwan, meets the requirements 19
of paragraph (2). 20
‘‘(2) L
IMITATION ON BENEFITS FOR COR -21
PORATE ENTITIES OF TAIWAN .— 22
‘‘(A) I
N GENERAL.—Subject to subpara-23
graphs (E) and (F), an entity meets the re-24
quirements of this paragraph only if it— 25 12
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‘‘(i) meets the ownership and income 1
requirements of subparagraph (B), 2
‘‘(ii) meets the publicly traded re-3
quirements of subparagraph (C), or 4
‘‘(iii) meets the qualified subsidiary 5
requirements of subparagraph (D). 6
‘‘(B) O
WNERSHIP AND INCOME REQUIRE -7
MENTS.—The requirements of this subpara-8
graph are met for an entity if— 9
‘‘(i) at least 50 percent (by vote and 10
value) of the total outstanding shares of 11
stock in such entity are owned directly or 12
indirectly by qualified residents of Taiwan, 13
and 14
‘‘(ii) less than 50 percent of such enti-15
ty’s gross income (and in the case of an 16
entity that is a member of a tested group, 17
less than 50 percent of the tested group’s 18
gross income) is paid or accrued, directly 19
or indirectly, in the form of payments that 20
are deductible for purposes of the income 21
taxes imposed by Taiwan, to persons who 22
are not— 23
‘‘(I) qualified residents of Tai-24
wan, or 25 13
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‘‘(II) United States persons who 1
meet such requirements with respect 2
to the United States as determined by 3
the Secretary to be equivalent to the 4
requirements of this subsection (deter-5
mined without regard to paragraph 6
(1)(B)) with respect to residents of 7
Taiwan. 8
‘‘(C) P
UBLICLY TRADED REQUIRE -9
MENTS.—An entity meets the requirements of 10
this subparagraph if— 11
‘‘(i) the principal class of its shares 12
(and any disproportionate class of shares) 13
of such entity are primarily and regularly 14
traded on an established securities market 15
in Taiwan, or 16
‘‘(ii) the primary place of manage-17
ment and control of the entity is in Taiwan 18
and all classes of its outstanding shares 19
described in clause (i) are regularly traded 20
on an established securities market in Tai-21
wan. 22
‘‘(D) Q
UALIFIED SUBSIDIARY REQUIRE -23
MENTS.—An entity meets the requirement of 24
this subparagraph if— 25 14
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‘‘(i) at least 50 percent (by vote and 1
value) of the total outstanding shares of 2
the stock of such entity are owned directly 3
or indirectly by 5 or fewer entities— 4
‘‘(I) which meet the requirements 5
of subparagraph (C), or 6
‘‘(II) which are United States 7
persons the principal class of the 8
shares (and any disproportionate class 9
of shares) of which are primarily and 10
regularly traded on an established se-11
curities market in the United States, 12
and 13
‘‘(ii) the entity meets the require-14
ments of clause (ii) of subparagraph (B). 15
‘‘(E) O
NLY INDIRECT OWNERSHIP 16
THROUGH QUALIFYING INTERMEDIARIES 17
COUNTED.— 18
‘‘(i) I
N GENERAL.—Stock in an entity 19
owned by a person indirectly through 1 or 20
more other persons shall not be treated as 21
owned by such person in determining 22
whether the person meets the requirements 23
of subparagraph (B)(i) or (D)(i) unless all 24 15
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such other persons are qualifying inter-1
mediate owners. 2
‘‘(ii) Q
UALIFYING INTERMEDIATE 3
OWNERS.—The term ‘qualifying inter-4
mediate owner’ means a person that is— 5
‘‘(I) a qualified resident of Tai-6
wan, or 7
‘‘(II) a resident of any other for-8
eign country (other than a foreign 9
country that is a foreign country of 10
concern) that has in effect a com-11
prehensive convention with the United 12
States for the avoidance of double tax-13
ation. 14
‘‘(iii) S
PECIAL RULE FOR QUALIFIED 15
SUBSIDIARIES.—For purposes of applying 16
subparagraph (D)(i), the term ‘qualifying 17
intermediate owner’ shall include any per-18
son who is a United States person who 19
meets such requirements with respect to 20
the United States as determined by the 21
Secretary to be equivalent to the require-22
ments of this subsection (determined with-23
out regard to paragraph (1)(B)) with re-24
spect to residents of Taiwan. 25 16
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‘‘(F) CERTAIN PAYMENTS NOT IN -1
CLUDED.—In determining whether the require-2
ments of subparagraph (B)(ii) or (D)(ii) are 3
met with respect to an entity, the following pay-4
ments shall not be taken into account: 5
‘‘(i) Arm’s-length payments by the en-6
tity in the ordinary course of business for 7
services or tangible property. 8
‘‘(ii) In the case of a tested group, 9
intra-group transactions. 10
‘‘(3) D
UAL RESIDENTS.— 11
‘‘(A) R
ULES FOR DETERMINATION OF STA -12
TUS.— 13
‘‘(i) I
N GENERAL.—An individual who 14
is an applicable dual resident and who is 15
described in subparagraph (B), (C), or (D) 16
shall be treated as a qualified resident of 17
Taiwan. 18
‘‘(ii) A
PPLICABLE DUAL RESIDENT .— 19
For purposes of this paragraph, the term 20
‘applicable dual resident’ means an indi-21
vidual who— 22
‘‘(I) is not a United States cit-23
izen, 24 17
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‘‘(II) is a resident of the United 1
States (determined without regard to 2
subparagraph (E)), and 3
‘‘(III) would be a qualified resi-4
dent of Taiwan but for paragraph 5
(1)(B). 6
‘‘(B) P
ERMANENT HOME .—An individual 7
is described in this subparagraph if such indi-8
vidual— 9
‘‘(i) has a permanent home available 10
to such individual in Taiwan, and 11
‘‘(ii) does not have a permanent home 12
available to such individual in the United 13
States. 14
‘‘(C) C
ENTER OF VITAL INTERESTS .—An 15
individual is described in this subparagraph if— 16
‘‘(i) such individual has a permanent 17
home available to such individual in both 18
Taiwan and the United States, and 19
‘‘(ii) such individual’s personal and 20
economic relations (center of vital inter-21
ests) are closer to Taiwan than to the 22
United States. 23
‘‘(D) H
ABITUAL ABODE.—An individual is 24
described in this subparagraph if— 25 18
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‘‘(i) such individual— 1
‘‘(I) does not have a permanent 2
home available to such individual in 3
either Taiwan or the United States, or 4
‘‘(II) has a permanent home 5
available to such individual in both 6
Taiwan and the United States but 7
such individual’s center of vital inter-8
ests under subparagraph (C)(ii) can-9
not be determined, and 10
‘‘(ii) such individual has a habitual 11
abode in Taiwan and not the United 12
States. 13
‘‘(E) U
NITED STATES TAX TREATMENT OF 14
QUALIFIED RESIDENT OF TAIWAN .—Notwith-15
standing section 7701, an individual who is 16
treated as a qualified resident of Taiwan by 17
reason of this paragraph for all or any portion 18
of a taxable year shall not be treated as a resi-19
dent of the United States for purposes of com-20
puting such individual’s United States income 21
tax liability for such taxable year or portion 22
thereof. 23
‘‘(4) R
ULES OF SPECIAL APPLICATION .— 24 19
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‘‘(A) DIVIDENDS.—For purposes of apply-1
ing this section to any dividend, paragraph 2
(2)(D) shall be applied without regard to clause 3
(ii) thereof. 4
‘‘(B) I
TEMS OF INCOME EMANATING FROM 5
AN ACTIVE TRADE OR BUSINESS IN TAIWAN .— 6
For purposes of this section— 7
‘‘(i) I
N GENERAL.—Notwithstanding 8
the preceding paragraphs of this sub-9
section, if an entity taxed as a corporation 10
in Taiwan is not a qualified resident of 11
Taiwan but meets the requirements of sub-12
paragraphs (A) and (B) of paragraph (1), 13
any qualified item of income such entity 14
derived from the United States shall be 15
treated as income of a qualified resident of 16
Taiwan. 17
‘‘(ii) Q
UALIFIED ITEMS OF INCOME .— 18
‘‘(I) I
N GENERAL.—The term 19
‘qualified item of income’ means any 20
item of income which emanates from, 21
or is incidental to, the conduct of an 22
active trade or business in Taiwan 23
(other than operating as a holding 24
company, providing overall supervision 25 20
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or administration of a group of com-1
panies, providing group financing, or 2
making or managing investments (un-3
less such making or managing invest-4
ments is carried on by a bank, insur-5
ance company, or registered securities 6
dealer in the ordinary course of its 7
business as such)). 8
‘‘(II) S
UBSTANTIAL ACTIVITY RE-9
QUIREMENT.—An item of income 10
which is derived from a trade or busi-11
ness conducted in the United States 12
or from a connected person shall be a 13
qualified item of income only if the 14
trade or business activity conducted in 15
Taiwan to which the item is related is 16
substantial in relation to the same or 17
a complementary trade or business ac-18
tivity carried on in the United States. 19
For purposes of applying this sub-20
clause, activities conducted by persons 21
that are connected to the entity de-22
scribed in clause (i) shall be deemed 23
to be conducted by such entity. 24 21
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‘‘(iii) EXCEPTION.—This subpara-1
graph shall not apply to any item of in-2
come derived by an entity if at least 50 3
percent (by vote or value) of such entity is 4
owned (directly or indirectly) or controlled 5
by residents of a foreign country of con-6
cern. 7
‘‘(d) O
THERDEFINITIONS ANDSPECIALRULES.— 8
For purposes of this section— 9
‘‘(1) U
NITED STATES PERMANENT ESTABLISH -10
MENT.— 11
‘‘(A) I
N GENERAL.—The term ‘United 12
States permanent establishment’ means, with 13
respect to a qualified resident of Taiwan, a per-14
manent establishment of such resident which is 15
within the United States. 16
‘‘(B) S
PECIAL RULE.—The determination 17
of whether there is a permanent establishment 18
of a qualified resident of Taiwan within the 19
United States shall be made without regard to 20
whether an entity which is taxed as a corpora-21
tion in Taiwan and which is a qualified resident 22
of Taiwan controls or is controlled by— 23
‘‘(i) a domestic corporation, or 24 22
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‘‘(ii) any other person that carries on 1
business in the United States (whether 2
through a permanent establishment or oth-3
erwise). 4
‘‘(2) P
ERMANENT ESTABLISHMENT .— 5
‘‘(A) I
N GENERAL.—The term ‘permanent 6
establishment’ means a fixed place of business 7
through which a trade or business is wholly or 8
partly carried on. Such term shall include— 9
‘‘(i) a place of management, 10
‘‘(ii) a branch, 11
‘‘(iii) an office, 12
‘‘(iv) a factory, 13
‘‘(v) a workshop, and 14
‘‘(vi) a mine, an oil or gas well, a 15
quarry, or any other place of extraction of 16
natural resources. 17
‘‘(B) S
PECIAL RULES FOR CERTAIN TEM -18
PORARY PROJECTS.— 19
‘‘(i) I
N GENERAL.—A building site or 20
construction or installation project, or an 21
installation or drilling rig or ship used for 22
the exploration or exploitation of the sea 23
bed and its subsoil and their natural re-24
sources, constitutes a permanent establish-25 23
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ment only if it lasts, or the activities of the 1
rig or ship lasts, for more than 12 months. 2
‘‘(ii) D
ETERMINATION OF 12 -MONTH 3
PERIOD.—For purposes of clause (i), the 4
period over which a building site or con-5
struction or installation project of a person 6
lasts shall include any period of more than 7
30 days during which such person does not 8
carry on activities at such building site or 9
construction or installation project but 10
connected activities are carried on at such 11
building site or construction or installation 12
project by one or more connected persons. 13
‘‘(C) H
ABITUAL EXERCISE OF CONTRACT 14
AUTHORITY TREATED AS PERMANENT ESTAB -15
LISHMENT.—Notwithstanding subparagraphs 16
(A) and (B), where a person (other than an 17
agent of an independent status to whom sub-18
paragraph (D)(ii) applies) is acting on behalf of 19
a trade or business of a qualified resident of 20
Taiwan and has and habitually exercises an au-21
thority to conclude contracts that are binding 22
on the trade or business, that trade or business 23
shall be deemed to have a permanent establish-24
ment in the country in which such authority is 25 24
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exercised in respect of any activities that the 1
person undertakes for the trade or business, un-2
less the activities of such person are limited to 3
those described in subparagraph (D)(i) that, if 4
exercised through a fixed place of business, 5
would not make this fixed place of business a 6
permanent establishment under the provisions 7
of that subparagraph. 8
‘‘(D) E
XCLUSIONS.— 9
‘‘(i) I
N GENERAL.—Notwithstanding 10
subparagraphs (A) and (B), the term ‘per-11
manent establishment’ shall not include— 12
‘‘(I) the use of facilities solely for 13
the purpose of storage, display, or de-14
livery of goods or merchandise belong-15
ing to the trade or business, 16
‘‘(II) the maintenance of a stock 17
of goods or merchandise belonging to 18
the trade or business solely for the 19
purpose of storage, display, or deliv-20
ery, 21
‘‘(III) the maintenance of a stock 22
of goods or merchandise belonging to 23
the trade or business solely for the 24 25
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purpose of processing by another 1
trade or business, 2
‘‘(IV) the maintenance of a fixed 3
place of business solely for the pur-4
pose of purchasing goods or merchan-5
dise, or of collecting information, for 6
the trade or business, 7
‘‘(V) the maintenance of a fixed 8
place of business solely for the pur-9
pose of carrying on, for the trade or 10
business, any other activity of a pre-11
paratory or auxiliary character, or 12
‘‘(VI) the maintenance of a fixed 13
place of business solely for any com-14
bination of the activities mentioned in 15
subclauses (I) through (V), provided 16
that the overall activity of the fixed 17
place of business resulting from this 18
combination is of a preparatory or 19
auxiliary character. 20
‘‘(ii) B
ROKERS AND OTHER INDE -21
PENDENT AGENTS .—A trade or business 22
shall not be considered to have a perma-23
nent establishment in a country merely be-24
cause it carries on business in such coun-25 26
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try through a broker, general commission 1
agent, or any other agent of an inde-2
pendent status, provided that such persons 3
are acting in the ordinary course of their 4
business as independent agents. 5
‘‘(3) T
ESTED GROUP.—The term ‘tested group’ 6
includes, with respect to any entity taxed as a cor-7
poration in Taiwan, such entity and any other entity 8
taxed as a corporation in Taiwan that— 9
‘‘(A) participates as a member with such 10
entity in a tax consolidation, fiscal unity, or 11
similar regime that requires members of the 12
group to share profits or losses, or 13
‘‘(B) shares losses with such entity pursu-14
ant to a group relief or other loss sharing re-15
gime. 16
‘‘(4) C
ONNECTED PERSON .—Two persons shall 17
be ‘connected persons’ if one owns, directly or indi-18
rectly, at least 50 percent of the interests in the 19
other (or, in the case of a corporation, at least 50 20
percent of the aggregate vote and value of the cor-21
poration’s shares) or another person owns, directly 22
or indirectly, at least 50 percent of the interests (or, 23
in the case of a corporation, at least 50 percent of 24
the aggregate vote and value of the corporation’s 25 27
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shares) in each person. In any case, a person shall 1
be connected to another if, based on all the relevant 2
facts and circumstances, one has control of the other 3
or both are under the control of the same person or 4
persons. 5
‘‘(5) F
OREIGN COUNTRY OF CONCERN .—The 6
term ‘foreign country of concern’ has the meaning 7
given such term under paragraph (7) of section 8
9901 of the William M. (Mac) Thornberry National 9
Defense Authorization Act for Fiscal Year 2021 (15 10
U.S.C. 4651(7)), as added by section 103(a)(4) of 11
the CHIPS Act of 2022). 12
‘‘(6) P
ARTNERSHIPS; BENEFICIARIES OF ES -13
TATES AND TRUSTS.—For purposes of this section— 14
‘‘(A) a qualified resident of Taiwan which 15
is a partner of a partnership which carries on 16
a trade or business within the United States 17
through a United States permanent establish-18
ment shall be treated as carrying on such trade 19
or business through such permanent establish-20
ment, and 21
‘‘(B) a qualified resident of Taiwan which 22
is a beneficiary of an estate or trust which car-23
ries on a trade or business within the United 24
States through a United States permanent es-25 28
•HR 33 EH
tablishment shall be treated as carrying on such 1
trade or business through such permanent es-2
tablishment. 3
‘‘(7) D
ENIAL OF BENEFITS FOR CERTAIN PAY -4
MENTS THROUGH HYBRID ENTITIES .—For purposes 5
of this section, rules similar to the rules of section 6
894(c) shall apply. 7
‘‘(e) A
PPLICATION.— 8
‘‘(1) I
N GENERAL.—This section shall not apply 9
to any period unless the Secretary has determined 10
that Taiwan has provided benefits to United States 11
persons for such period that are reciprocal to the 12
benefits provided to qualified residents of Taiwan 13
under this section. 14
‘‘(2) P
ROVISION OF RECIPROCITY .—The Presi-15
dent or his designee is authorized to exchange let-16
ters, enter into an agreement, or take other nec-17
essary and appropriate steps relative to Taiwan for 18
the reciprocal provision of the benefits described in 19
this section. 20
‘‘(f) R
EGULATIONS OROTHERGUIDANCE.— 21
‘‘(1) I
N GENERAL.—The Secretary shall issue 22
such regulations or other guidance as may be nec-23
essary or appropriate to carry out the provisions of 24 29
•HR 33 EH
this section, including such regulations or guidance 1
for— 2
‘‘(A) determining— 3
‘‘(i) what constitutes a United States 4
permanent establishment of a qualified 5
resident of Taiwan, and 6
‘‘(ii) income that is effectively con-7
nected with such a permanent establish-8
ment, 9
‘‘(B) preventing the abuse of the provisions 10
of this section by persons who are not (or who 11
should not be treated as) qualified residents of 12
Taiwan, 13
‘‘(C) requirements for record keeping and 14
reporting, 15
‘‘(D) rules to assist withholding agents or 16
employers in determining whether a foreign per-17
son is a qualified resident of Taiwan for pur-18
poses of determining whether withholding or re-19
porting is required for a payment (and, if with-20
holding is required, whether it should be applied 21
at a reduced rate), 22
‘‘(E) the application of subsection 23
(a)(1)(D)(i) to stock held by predecessor own-24
ers, 25 30
•HR 33 EH
‘‘(F) determining what amounts are to be 1
treated as qualified wages for purposes of sub-2
section (a)(2), 3
‘‘(G) determining the amounts to which 4
subsection (a)(3) applies, 5
‘‘(H) defining established securities market 6
for purposes of subsection (c), 7
‘‘(I) the application of the rules of sub-8
section (c)(4)(B), 9
‘‘(J) the application of subsection (d)(6) 10
and section 1446, 11
‘‘(K) determining ownership interests held 12
by residents of a foreign country of concern, 13
and 14
‘‘(L) determining the starting and ending 15
dates for periods with respect to the application 16
of this section under subsection (e), which may 17
be separate dates for taxes withheld at the 18
source and other taxes. 19
‘‘(2) R
EGULATIONS TO BE CONSISTENT WITH 20
MODEL TREATY.—Any regulations or other guidance 21
issued under this section shall, to the extent prac-22
tical, be consistent with the provisions of the United 23
States model income tax convention dated February 24
7, 2016.’’. 25 31
•HR 33 EH
(b) CONFORMINGAMENDMENT TO WITHHOLDING 1
T
AX.—Subchapter A of chapter 3 of the Internal Revenue 2
Code of 1986 is amended by adding at the end the fol-3
lowing new section: 4
‘‘SEC. 1447. WITHHOLDING FOR QUALIFIED RESIDENTS OF 5
TAIWAN. 6
‘‘For reduced rates of withholding for certain resi-7
dents of Taiwan, see section 894A.’’. 8
(c) C
LERICALAMENDMENTS.— 9
(1) The table of sections for subpart D of part 10
II of subchapter N of chapter 1 of the Internal Rev-11
enue Code of 1986 is amended by inserting after the 12
item relating to section 894 the following new item: 13
‘‘Sec. 894A. Special rules for qualified residents of Taiwan.’’.
(2) The table of sections for subchapter A of 14
chapter 3 of such Code is amended by adding at the 15
end the following new item: 16
‘‘Sec. 1447. Withholding for qualified residents of Taiwan.’’.
TITLE II—UNITED STATES-TAI-17
WAN TAX AGREEMENT AU-18
THORIZATION ACT 19
SEC. 201. SHORT TITLE. 20
This title may be cited as the ‘‘United States-Taiwan 21
Tax Agreement Authorization Act’’. 22
SEC. 202. DEFINITIONS. 23
In this title: 24 32
•HR 33 EH
(1) AGREEMENT.—The term ‘‘Agreement’’ 1
means the tax agreement authorized by section 2
203(a). 3
(2) A
PPROPRIATE CONGRESSIONAL COMMIT -4
TEES.—The term ‘‘appropriate congressional com-5
mittees’’ means— 6
(A) the Committee on Foreign Relations 7
and the Committee on Finance of the Senate; 8
and 9
(B) the Committee on Ways and Means of 10
the House of Representatives. 11
(3) A
PPROVAL LEGISLATION .—The term ‘‘ap-12
proval legislation’’ means legislation that approves 13
the Agreement. 14
(4) I
MPLEMENTING LEGISLATION .—The term 15
‘‘implementing legislation’’ means legislation that 16
makes any changes to the Internal Revenue Code of 17
1986 necessary to implement the Agreement. 18
SEC. 203. AUTHORIZATION TO NEGOTIATE AND ENTER 19
INTO AGREEMENT. 20
(a) I
NGENERAL.—Subsequent to a determination 21
under section 894A(e)(1) of the Internal Revenue Code 22
of 1986 (as added by the United States-Taiwan Expedited 23
Double-Tax Relief Act), the President is authorized to ne-24
gotiate and enter into a tax agreement relative to Taiwan. 25 33
•HR 33 EH
(b) ELEMENTS OFAGREEMENT.— 1
(1) C
ONFORMITY WITH BILATERAL INCOME TAX 2
CONVENTIONS.—The President shall ensure that— 3
(A) any provisions included in the Agree-4
ment conform with provisions customarily con-5
tained in United States bilateral income tax 6
conventions, as exemplified by the 2016 United 7
States Model Income Tax Convention; and 8
(B) the Agreement does not include ele-9
ments outside the scope of the 2016 United 10
States Model Income Tax Convention. 11
(2) I
NCORPORATION OF TAX AGREEMENTS AND 12
LAWS.—Notwithstanding paragraph (1), the Agree-13
ment may incorporate and restate provisions of any 14
agreement, or existing United States law, addressing 15
double taxation for residents of the United States 16
and Taiwan. 17
(3) A
UTHORITY.—The Agreement shall include 18
the following statement: ‘‘The Agreement is entered 19
into pursuant to the United States-Taiwan Tax 20
Agreement Authorization Act.’’ 21
(4) E
NTRY INTO FORCE.—The Agreement shall 22
include a provision conditioning entry into force 23
upon— 24 34
•HR 33 EH
(A) enactment of approval legislation and 1
implementing legislation pursuant to section 2
207; and 3
(B) confirmation by the Secretary of the 4
Treasury that the relevant authority in Taiwan 5
has approved and taken appropriate steps re-6
quired to implement the Agreement. 7
SEC. 204. CONSULTATIONS WITH CONGRESS. 8
(a) N
OTIFICATIONUPONCOMMENCEMENT OF NEGO-9
TIATIONS.—The President shall provide written notifica-10
tion to the appropriate congressional committees of the 11
commencement of negotiations between the United States 12
and Taiwan on the Agreement at least 15 calendar days 13
before commencing such negotiations. 14
(b) C
ONSULTATIONSDURINGNEGOTIATIONS.— 15
(1) B
RIEFINGS.—Not later than 90 days after 16
commencement of negotiations with respect to the 17
Agreement, and every 180 days thereafter until the 18
President enters into the Agreement, the President 19
shall provide a briefing to the appropriate congres-20
sional committees on the status of the negotiations, 21
including a description of elements under negotia-22
tion. 23
(2) M
EETINGS AND OTHER CONSULTATIONS .— 24 35
•HR 33 EH
(A) IN GENERAL.—In the course of nego-1
tiations with respect to the Agreement, the Sec-2
retary of the Treasury, in coordination with the 3
Secretary of State, shall— 4
(i) meet, upon request, with the chair-5
man or ranking member of any of the ap-6
propriate congressional committees regard-7
ing negotiating objectives and the status of 8
negotiations in progress; and 9
(ii) consult closely and on a timely 10
basis with, and keep fully apprised of the 11
negotiations, the appropriate congressional 12
committees. 13
(B) E
LEMENTS OF CONSULTATIONS .—The 14
consultations described in subparagraph (A) 15
shall include consultations with respect to— 16
(i) the nature of the contemplated 17
Agreement; 18
(ii) how and to what extent the con-19
templated Agreement is consistent with the 20
elements set forth in section 203(b); and 21
(iii) the implementation of the con-22
templated Agreement, including— 23
(I) the general effect of the con-24
templated Agreement on existing laws; 25 36
•HR 33 EH
(II) proposed changes to any ex-1
isting laws to implement the con-2
templated Agreement; and 3
(III) proposed administrative ac-4
tions to implement the contemplated 5
Agreement. 6
SEC. 205. APPROVAL AND IMPLEMENTATION OF AGREE-7
MENT. 8
(a) I
NGENERAL.—The Agreement may not enter 9
into force unless— 10
(1) the President, at least 60 days before the 11
day on which the President enters into the Agree-12
ment, publishes the text of the contemplated Agree-13
ment on a publicly available website of the Depart-14
ment of the Treasury; and 15
(2) there is enacted into law, with respect to 16
the Agreement, approval legislation and imple-17
menting legislation pursuant to section 207. 18
(b) E
NTRYINTOFORCE.—The President may pro-19
vide for the Agreement to enter into force upon— 20
(1) enactment of approval legislation and imple-21
menting legislation pursuant to section 207; and 22
(2) confirmation by the Secretary of the Treas-23
ury that the relevant authority in Taiwan has ap-24 37
•HR 33 EH
proved and taken appropriate steps required to im-1
plement the Agreement. 2
SEC. 206. SUBMISSION TO CONGRESS OF AGREEMENT AND 3
IMPLEMENTATION POLICY. 4
(a) S
UBMISSION OFAGREEMENT.—Not later than 5
270 days after the President enters into the Agreement, 6
the President or the President’s designee shall submit to 7
Congress— 8
(1) the final text of the Agreement; and 9
(2) a technical explanation of the Agreement. 10
(b) S
UBMISSION OFIMPLEMENTATION POLICY.—Not 11
later than 270 days after the President enters into the 12
Agreement, the Secretary of the Treasury shall submit to 13
Congress— 14
(1) a description of those changes to existing 15
laws that the President considers would be required 16
in order to ensure that the United States acts in a 17
manner consistent with the Agreement; and 18
(2) a statement of anticipated administrative 19
action proposed to implement the Agreement. 20
SEC. 207. CONSIDERATION OF APPROVAL LEGISLATION 21
AND IMPLEMENTING LEGISLATION. 22
(a) I
NGENERAL.—The approval legislation with re-23
spect to the Agreement shall include the following: ‘‘Con-24
gress approves the Agreement submitted to Congress pur-25 38
•HR 33 EH
suant to section 206 of the United States-Taiwan Tax 1
Agreement Authorization Act on llll.’’, with the 2
blank space being filled with the appropriate date. 3
(b) A
PPROVALLEGISLATIONCOMMITTEEREFER-4
RAL.—The approval legislation shall— 5
(1) in the Senate, be referred to the Committee 6
on Foreign Relations; and 7
(2) in the House of Representatives, be referred 8
to the Committee on Ways and Means. 9
(c) I
MPLEMENTING LEGISLATIONCOMMITTEERE-10
FERRAL.—The implementing legislation shall— 11
(1) in the Senate, be referred to the Committee 12
on Finance; and 13
(2) in the House of Representatives, be referred 14
to the Committee on Ways and Means. 15
SEC. 208. RELATIONSHIP OF AGREEMENT TO INTERNAL 16
REVENUE CODE OF 1986. 17
(a) I
NTERNALREVENUECODE OF1986 TOCON-18
TROL.—No provision of the Agreement or approval legisla-19
tion, nor the application of any such provision to any per-20
son or circumstance, which is inconsistent with any provi-21
sion of the Internal Revenue Code of 1986, shall have ef-22
fect. 23
(b) C
ONSTRUCTION.—Nothing in this title shall be 24
construed— 25 39
•HR 33 EH
(1) to amend or modify any law of the United 1
States; or 2
(2) to limit any authority conferred under any 3
law of the United States, 4
unless specifically provided for in this title. 5
SEC. 209. AUTHORIZATION OF SUBSEQUENT TAX AGREE-6
MENTS RELATIVE TO TAIWAN. 7
(a) I
NGENERAL.—Subsequent to the enactment of 8
approval legislation and implementing legislation pursuant 9
to section 207— 10
(1) the term ‘‘tax agreement’’ in section 203(a) 11
shall be treated as including any tax agreement rel-12
ative to Taiwan which supplements or supersedes 13
the Agreement to which such approval legislation 14
and implementing legislation relates, and 15
(2) the term ‘‘Agreement’’ shall be treated as 16
including such tax agreement. 17
(b) R
EQUIREMENTS, ETC., TOAPPLYSEPA-18
RATELY.—The provisions of this title (including section 19
204) shall be applied separately with respect to each tax 20
agreement referred to in subsection (a). 21
SEC. 210. UNITED STATES TREATMENT OF DOUBLE TAX-22
ATION MATTERS WITH RESPECT TO TAIWAN. 23
(a) F
INDINGS.—Congress makes the following find-24
ings: 25 40
•HR 33 EH
(1) The United States addresses issues with re-1
spect to double taxation with foreign countries by 2
entering into bilateral income tax conventions 3
(known as tax treaties) with such countries, subject 4
to the advice and consent of the Senate to ratifica-5
tion pursuant to article II of the Constitution. 6
(2) The United States has entered into more 7
than sixty such tax treaties, which facilitate eco-8
nomic activity, strengthen bilateral cooperation, and 9
benefit United States workers, businesses, and other 10
United States taxpayers. 11
(3) Due to Taiwan’s unique status, the United 12
States is unable to enter into an article II tax treaty 13
with Taiwan, necessitating an agreement to address 14
issues with respect to double taxation. 15
(b) S
TATEMENT OFPOLICY.—It is the policy of the 16
United States to— 17
(1) provide for additional bilateral tax relief 18
with respect to Taiwan, beyond that provided for in 19
section 894A of the Internal Revenue Code of 1986 20
(as added by the United States-Taiwan Expedited 21
Double-Tax Relief Act), only after entry into force 22
of an Agreement, as provided for in section 205, and 23
only in a manner consistent with such Agreement; 24
and 25 41
•HR 33 EH
(2) continue to provide for bilateral tax relief 1
with sovereign states to address double taxation and 2
other related matters through entering into bilateral 3
income tax conventions, subject to the Senate’s ad-4
vice and consent to ratification pursuant to article II 5
of the Constitution. 6
Passed the House of Representatives January 15,
2025.
Attest:
Clerk. 119
TH
CONGRESS
1
ST
S
ESSION
H. R. 33
AN ACT
To amend the Internal Revenue Code of 1986 to
provide special rules for the taxation of certain
residents of Taiwan with income from sources
within the United States.